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The “Power of Siberia 2” pipeline is intended to transport large quantities of Russian gas to China. But Beijing is resisting. This is due to the price – and political considerations.
Five years of construction, 2,600 kilometers long and a capacity of 50 billion cubic meters of gas per year: the “Power of Siberia 2” pipeline, which is one day to run from Russia to China, is a mammoth project. For Moscow, it means increased revenues from the gas business, for Beijing, cheap natural gas for its households and companies. And it is intended to improve the image of Wladimir Putin The Kremlin chief is only too keen to show the West that he is anything but isolated internationally, that despite his crimes in Ukraine War still has more friends than some people in Europe or the USA would like.
Beijing is one of the Kremlin’s closest allies and supports Russia’s war of aggression diplomatically and by supplying goods that can be used for military and civilian purposes. If Russia has its way, the planned pipeline will also fill the Russian war chest. The problem: so far, “Power of Siberia 2” only exists on paper. And it could stay that way. The prestige project threatens to become a setback for Putin.
Both sides are trying to keep the project alive, at least in the public eye. When Putin visited his Chinese counterpart Xi Jinping in May, he once again talked about the planned pipeline. The Russian energy giant Gazprom and other companies involved would surely soon reach an agreement on the pipeline’s route, Putin said. And Russian Deputy Prime Minister Alexander Novak, who is responsible for the important oil and gas business, also said on the occasion of Putin’s visit to China that the relevant contracts for “Power of Siberia 2” would be signed “in the near future”.
Xi Jinping and Vladimir Putin: The relationship between the two heads of state is becoming more complicated. © Sergei Karpukhin/Sputnik/afp (montage)
“Power of Siberia 2”: Pipeline project between Russia and China not coming to fruition for the time being
Nothing has happened since then. Even a visit by Chinese Prime Minister Li Qiang to Moscow planned for this week is unlikely to bring any movement to the stalled project. What’s more, Mongolia, through whose territory a large part of the planned pipeline is to run, no longer seems to believe in the project.
Like the Hong Kongers South China Morning Post (SCMP) reports, “Power of Siberia” is not included in the government program presented on Friday (16 August) by the new Mongolian government coalition for the next four years. Democratic Mongolia, which lies between the two autocracies Russia and China, has been governed by a three-party coalition led by the Mongolian People’s Party since the parliamentary elections at the end of June. As a transit country, Mongolia would be involved in the construction of the possible pipeline from Russia to China and would also collect transit fees. In July, Mongolian President Uchnaagiin Khürelsüch described the project as “important for his country’s economy” in a conversation with Putin.
Munkhnaran Bayarlkhagva, a former member of Mongolia’s National Security Council, explains the absence of the pipeline in the new government program with disputes between Beijing and Moscow over the price of Russian gas. “We are entering a long pause in which Moscow no longer believes it will get the deal it wants from Beijing and will probably postpone the project until better times,” Bayarlkhagva told the SCMPIn addition, there is discontent in Beijing about Gazprom wanting sole control over the Mongolian part of the pipeline. “That would have led to a sudden and long-term Increase in Moscow’s influence in Mongolia to the detriment of Beijing means,” said Bayarlkhagva.
Are China and Putin’s Russia arguing over the price of gas?
The Chinese partner in the construction of the pipeline is the China National Petroleum Corporation (CNPC). The state-owned company reportedly wants to pay for Russian gas that comes to China through the planned pipeline. only pay as much as the gas costs on the Russian domestic marketBut because the construction of the pipeline would cost huge sums, this is not acceptable for Gazprom, Anna Kireeva from the State Institute of International Relations in Moscow told SCMPBoth sides would therefore have to find a compromise.
China currently obtains Russian gas, among other things, via the “Power of Siberia 1” pipeline, which was put into operation at the end of 2019. Pipeline gas also flows into the People’s Republic from Central Asia and Myanmar. The People’s Republic also imports large quantities of liquefied natural gas (LNG), mainly from Australia and Qatar. While for Beijing Russia is just one supplier among many, the Russians are much more dependent on customers in China. “Power of Siberia 2” is intended to offset the losses incurred by Russia as a result of the closure of the “Nord Stream 1” Baltic Sea pipeline. The planned pipeline to China is intended to bring gas from a large deposit on the Yamal Peninsula in northwest Siberia. Large quantities also flowed from there to Western Europe until the beginning of the Ukraine war.
But Beijing is already paying much less for Russian gas than the Kremlin would like. According to a report by the Financial Times vThe Chinese are paying an average of just 4.40 US dollars per million British Thermal Units (BTU) – less than half as much as Moscow was once able to collect from European buyers. Bitter for the Kremlin: Recently, oil exports to China have also declined. As the news agency Reuters reported on Tuesday (20 August) that Chinese imports from Russia fell by 7.4 percent in July compared to the previous year. The reason for this was the decline in demand in China.
